Earlier this week energy consumers witnessed a war of wills between energy consuming nations, led by the U.S., and the energy producers of OPEC+. The oil consumer group, in response to rising oil prices (+60% since the start of 2021) and a lack of additional supply from OPEC+, recently announced a plan to release a portion of their strategic petroleum reserves. OPEC+, in turn, stated they would meet such release with a cut in production. All of this begs the question -- Where has domestic production gone, which had served as the swing producer several years ago and, in particular, where are the shale drillers?
The table below shows that U.S. shale drillers are operating at a fraction of prior peak rig counts, with the peak being 1,749 rigs compared to only 472 in operation today. However, this only tells part of the story, as the current operating rigs are producing 8.6mm barrels per day vs. peak production of 9.4mm. When we include total U.S. oil production, we see a gap of about 1.6mm barrels per day vs. the peak. This would imply that shale is only part of the problem.
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